Question: The Ewert Exploration Company is considering two mutually exclusive plans for extracting oil on property for which it has mineral rights. Both plans call for

The Ewert Exploration Company is considering two mutually exclusive plans for extracting oil on property for which it has mineral rights. Both plans call for the expenditure of $9.5 million to drill development wells. Under Plan A, all the oil will be extracted in 1 year, producing a cash flow at t = 1 of $10.5 million; under Plan B, cash flows will be $1.4 million per year for 20 years.

What are the annual incremental cash flows

what rate of return

Identify each project's IRR.

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